The Role of Audit Committee Efficiency in Mitigating Financial Fragility of Banks:An Analytical Study of a Sample of Iraqi Banks Listed on the Iraq Stock Exchange for the Period (2016–2024)

Abstract

This study aims to identify the role of audit committee efficiency in reducing financial fragility. The research sample consisted private Iraqi commercial banks listed for the period (2016–2024). The research variables were measured quantitatively. The independent variable, audit committee efficiency, was measured through its indicators (audit committee independence, audit committee size, members’ financial and accounting expertise, number of audit committee meetings, and the ownership percentage of audit committee members). The dependent variable, financial fragility, was measured using the Z-Score indicator.

The current study reached a set of conclusions, the most important of which is that audit committee efficiency increases in reducing risks when committee members are fully independent, when the size of the committee is within the specified standard, when members possess the necessary accounting and financial expertise, when an adequate and appropriate number of meetings is held, and when the ownership percentage of members ensures the integrity of supervisory decisions. The results also showed that most banks comply with the legal minimum requirement for committee size, which is three members; however, this represents formal compliance with legal provisions, as such compliance appears weak when compared to the level of independence.

The main recommendations emphasized that the banks in the research sample should adhere to professional standards when forming audit committees by selecting a sufficient number of members with expertise and qualifications in accounting and financial aspects. It is also necessary to ensure members’ independence from executive management, adhere to a regular meeting schedule, and establish controls regarding members’ share ownership in the bank.